Entrepreneurs tend to fail for the same 3 reasons — here's how to protect yourself against them

Many entrepreneurs fail because they don't do an honest
assessment of their skills and management.

Even with a great idea, poor execution and bad
financial planning can tank a venture.

Entrepreneurs need to have a good work ethic and
patience to get through the tough moments of creating an
enterprise.

The most successful entrepreneurs typically start with
a side business and take time to develop a full business
plan.

Recently, I spoke with one of my long-time mentors and successful
serial entrepreneurs, Jim Hazboun, who is also a top C-Level
executive at a large global company. He and I talked
about two critical things no one ever tells
you about becoming an entrepreneur, specifically the
importance of having a compelling "why" for what you are doing as
well as doing an honest assessment of yourself, what you are good
at, and where you have gaps.

Even if you pass through both of those hoops successfully, being
an entrepreneur isn't for the faint of heart. So why do some
entrepreneurial ventures fail where others succeed and grow in a sustainable way?

I followed up with Jim and asked him what he sees as the most
common reasons for entrepreneurial failure and the key things
every entrepreneur needs to do to have a fighting chance at
success.

The 3 most common reasons for failure

Here is what Jim sees all the time that causes otherwise
good ventures to fail:

1. Poor execution

You might have the best idea in the world, but you still have to
execute well to get results. Innovation and execution are very
different skill sets, and sometimes we think that having one
means we'll be good at the other.

2. Poor financial management

Entrepreneurs need to know their financials and numbers backwards
and forwards. Many businesses fail because of poor financial
management. Even if your company is growing, you can still fail
if you don't manage the cash flows and have enough working
capital.

As another mentor of mine used to say to me:

"At this point in the game, who cares how good your P&L
looks. If your cash flow isn't good, you're done."

3. Lack of core entrepreneurial competencies

Many fail due to lack of work ethic, selling skills, and people
(EQ) skills. Many also don't have the emotional fortitude or
patience to stay the course during hard times. Lastly, pride or
hubris have led many to failure.

I then asked Jim about for advice about how to get started in a
way that mitigates those three common pitfalls.

The 5 things you must do

1. Launch your business intelligently

This advice isn't glamorous and may even run counter to what you
may hear from others who may say that if you really believe in it
sell everything you have to fund it.

Jim told me in no uncertain terms:

"Never mortgage your house!"

Today, more than ever, there are a number of funding options
available to the true entrepreneur. Jim prefers
bootstrapping or using lower risk sources like SBA loans or crowd
funding sites, such as GoFundMe or KickStarter. While you
must go "all in" emotionally, Jim talks about how important
it is to be wise and prepare for both success and failure
financially.

2. Moonlight

Many entrepreneurs helped successfully launch their business as a
side business. I personally did it this way. Moonlighting is a
great way to help mitigate risk. Jim is a strong champion of
starting your business while working for someone else. The key is
to avoid conflicts of interest and ensure you are delivering
exceptional value to your employer at the same time.

3. Do your homework

While starting a business is risky, good preparation helps reduce
the risk and helps position you for success. Here is where
Jim says something of great importance:

"If you have a new business idea that no one else is doing,
that should actually cause you some concern."

That may sound counter-intuitive and like it flies in the face of
the spirit of innovation and ingenuity. Here is what
Jim says about it, though.

"Unless you've patented a brilliant new technology or product,
you will want to see that other entrepreneurs are already doing
well in the business you are considering. If you follow the
adoption curve, you ideally want to be an early adopter or fast
follower.

There is always a danger with being the innovator.
Innovators don't always survive because they expend all of
their fuel trying to help consumers understand the 'new thing.'

Look at some of the greatest business successes like
Google, Apple, and Facebook. They weren't the innovators. There
were other search engines, computer companies, and social
networks. These guys were the fast followers that fine-tuned
the idea and executed against it better than anyone else."

4. Take the time to build a strong business plan

Put in the time to go through a comprehensive business plan.
Going through this process will help you address the key areas
needed to successfully launch and run your business. It will also
force you to confront any confirmation bias you may have - that
psychological thing we all do where we believe what we want to
believe and disregard the rest.

5. Surround yourself with others who believe in you but who
will also give you honest encouragement

You don't want to surround yourself with just "yes" people. But
you also don't want to be surrounded by negative and toxic
people. Surround yourself with people that you can trust.